Bitcoin’s Correlation to US Stocks Hits 20-month Lows – Here’s Why That’s Bullish for BTC
Recently, the connection between Bitcoin and US equities markets reached its lowest point in more than a year and a half. According to a chart provided by cryptocurrency analytics company CoinMetrics, the 30-day correlation between Bitcoin and the S&P 500 has just barely dipped below 0.20, marking its lowest level since September 2021.
That represents a significant shift from the middle of 2022, when stocks and Bitcoin were generally running in lockstep and the 30-day correlation temporarily exceeded 0.7.
That link will probably continue to decline given the gap between the S&P 500’s recent stagnation and the recent surge in the price of Bitcoin.
The value would hit a three-year low if it drops below 0.08.
Why is Bitcoin’s Correlation to Stocks Breaking Down?
In 2021 and 2022, the majority of people believed that Bitcoin was a speculative technology or asset that should trade in accordance with market liquidity, much like a tech stock.
That largely explains why the cryptocurrency experienced such a massive boost in 2020 and 2021 when the US (and worldwide) economy was flooded with fiscal and monetary stimulus, before sharply declining in 2022 as this stimulus was reduced (primarily via aggressive rate hikes from major central banks).
Bitcoin’s price mostly changed in sync with that of the US tech stock sector during its price surge in 2020–2021 and subsequent crash in 2022.
Investors may now be starting to see Bitcoin as a safe-haven alternative to the fiat-based central bank-centered fractional reserve banking system, rather than as a speculative asset (like a tech stock). This would be in line with how its developers and supporters have wanted investors to see Bitcoin throughout.
Bitcoin has made a strong case for the moniker “digital gold” during the previous few weeks.
As investors seek out “harder” currencies and forms of trade, bitcoin has increased by almost 40% from its previous monthly low of around $20,000, and the price of gold has also increased as a result.
Since their value is more susceptible to inflation, fiat currencies (such as the US dollar, Euro, and British pound) aren’t seen as being as durable as gold and Bitcoin.
Due to investors’ concerns about how bad the current problems in the banking sector may get and how this will affect the outlook for economic development, bitcoin has been receiving a safe haven bid at the same time that US stocks have been underperforming.
Here’s Why BTC’s Falling Correlation to Stocks is Bullish
Bitcoin is not merely a speculative technology that will probably disappear in the near future.
A true, more equitable, and transparent alternative to the current financial system is provided by this extremely reliable, incorruptible, decentralised peer-to-peer payments system.
And now that investors finally seem to be treating it as such, the cryptocurrency is on the upward.
If the banking crisis gets worse and stocks drop as a result, Bitcoin’s safe-haven value is likely to increase much more.
Even if American authorities are successful in averting a catastrophe, the likelihood of considerable more tightening from the US Federal Reserve has probably suffered a fatal blow.
In other words, it appears like the hike’s end is most likely just around the corner.
However, if future financial conditions become more favourable (i.e., US yields decline), both gold and Bitcoin should benefit.
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